The term perfect competition refers to a theoretical market structure. Although perfect competition rarely occurs in real-world markets, it provides a useful model for explaining how supply and demand affect prices and behavior in a market economy. Under perfect competition, there are many buyers and sellers, and price. perfect competition market, copetative, market, perfect, m n , m
2. contents
• Competitive Market
i. The Meaning of Competition
ii. The Revenue of a Competitive Firm
• Profit Maximization and the Competitive Firm’s
Supply Curve
i. A Simple Example of Profit Maximization
ii. The Marginal-Cost Curve and the Firm’s
Supply Decision
iii. The Firm’s Short-Run Decision to Shut Down
iv. Spilt Milk and Other Sunk Costs
v. The Firm’s Long-Run Decision to Exit or Enter
a Market
• Measuring Profit in Our Graph for the Competitive
Firm
• The Supply Curve in a Competitive Market
i. The Short Run: Market Supply with a Fixed
Number of Firms
ii. The Long Run: Market Supply with Entry and
Exit
iii. Why Do Competitive Firms Stay in Business If
They Make Zero Profit?
iv. A Shift in Demand in the Short Run and Long
Run
v. Why the Long-Run Supply Curve Might Slope
Upward
• Conclusion: Behind the Supply Curve
3. Competitive Market
• competitive market means a market with many buyers and sellers
trading identical products so that each buyer and seller is a price
taker.
• A competitive market, sometimes called a perfectly competitive
market, has two characteristics:
a. There are many buyers and many sellers in the market.
b. The goods offered by the various sellers are largely the same.
